THE SECURITIZATION AND

RECONSTRUCTION OF
FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITY
IINTEREST ACT, 2002
 SARFAESI ACT,2002

ENFORCEMENT OF SECURITY INTERESTS

SECURITIZATION
• Securitisation means acquisition of financial assets by any securitization company or
reconstruction company. from any originator, whether by raising funds by securitization co.
through QIB’s by issue of security receipts representing, undivided interest in such financial
asset or otherwise.
Securing Assets
Lender/Originator
Borrower/Obligor

Financial Assistance Considerati

Transfer on of asset
of purchased
Secured
Assets
Security Receipt
QIB/ Investor SPV

Subscription of securities
 SARFAESI ACT, 2002
Introduction:-
It is an act to regulate securitization and reconstruction of financial assets and
enforcement of security interest and for matters connected therewith or incidental
thereto.
The Act Deals with the Following:-
a. Registration and regulation of Asset Reconstruction Companies (ARCs) by the Reserve
Bank of India;
b. Facilitating securitization of financial assets of banks and financial institutions with or
without the benefit of underlying securities.
c. Facilitating easy transferability of financial assets by the ARC to acquire financial assets of banks
and financial institutions by issue of debentures or bonds or any other security in the nature of a
debenture;
d. Empowering ARCs to raise funds by issue of security receipts to qualified buyers
e. Facilitating reconstruction of financial assets acquired by exercising powers of enforcement of
securities or change of management or other powers which are proposed to be conferred on the
banks and financial institutions
f. Declaration of any securitization company or reconstruction company registered with the
Reserve Bank of India as a public financial institution for the purpose of section 4A of the
Companies Act,1956
g. Defining ‘security interest’ as any type of security including mortgage and charge on immovable
properties given for due repayment of any financial assistance given by any bank or financial
institution;
h. Empowering banks and financial institutions to take possession of securities given for
financial assistance and sell or lease the same or take over management in the event of
default, i.e. classification of the borrower’s account as non-performing asset in
accordance with the directions given or under guidelines issued by the Reserve Bank of
India from time to time
i. The rights of a secured creditor to be exercised by one or more of its officers
authorized in this behalf in accordance with the rules made by the Central Government;
j. An appeal against the action of any bank or financial institution to the concerned Debts
Recovery Tribunal and a second appeal to the Appellate Debts Recovery Tribunal;
k. Setting up or causing to be set up a Central Registry by the Central Government for the
purpose of registration of transactions relating to securitization, asset reconstruction
and creation of security interest.
l. Application of the proposed legislation initially to banks and financial institutions and
empowerment of the Central Government to extend the application of the proposed legislation to
non-banking financial companies and other entities
m. Non-application of the proposed legislation to security interests in agricultural lands, loans not
exceeding rupees one lakh and cases where eighty per cent, of the loans have been repaid by
the borrower.
How to remember this:

अरे राम चंदर securityअफसर की टां सफर हो गयी. Power , facility,बक की

नौकरी तो गयी ही जो finance िलया था वो भी बक ने interest समेत वसूल िलया।
अफसर ने possession ले िलया। बात ा थी register म application नहीं enter की थी
The Act is divided into six chapters having 42 sections:
The Act introduced multiple new concepts and infrastructures to support ease of recovery actions
such as:
• Formation of Securitization or Reconstruction companies
• Recovery without interference of courts
• Framework for revival or reconstruction of the borrowers’ business
• Central registry
• Qualified buyers
• Security receipts
Some of the Key Definitions:-
• “Asset reconstruction” means acquisition by any securitisation company (SC) or
reconstruction company (RC) of any right or interest of any bank or financial institution in
any financial assistance for the purpose of realization of such financial assistance
[Section2(b)]
• The term “financial assistance” means any loan or advance granted or any debentures
or bonds subscribed or any guarantees given or letters of credit established or any other
credit facility extended by any bank or financial institution; [Section 2(k)]
• The purpose of acquisition by securitization company (SC) or reconstruction company
(RC) is to realize such assets and not to stay invested by becoming the shareholders of
the company. However it has the right to take over the management of the business,
subject to RBI’s guidelines from time to time. Such realized amount should be held and
applied towards redemption of investments and payment of returns assured to the QIBs
• “Asset reconstruction company (ARC)” means a company registered with Reserve
Bank under section 3 for the purposes of carrying on the business of asset
reconstruction or securitization, or both. [Section 2(ba)]
• An ARC is not a banking company although it is regulated by RBI. Such company cannot
carry out any other business other than securitization or reconstruction.
• “Borrower” means any person who has been granted financial assistance by any bank or financial
institution or who has given any guarantee or created any mortgage or pledge as security for the
financial assistance granted by any bank or financial institution and includes a person who
becomes borrower of a securitization company or reconstruction company consequent upon
acquisition by it of any rights or interest of any bank or financial institution in relation to such
financial assistance or who has raised funds through issue of debt securities . [Section 2(f)]
• “default” means:
i. Non-payment of any debt or any other amount payable by the borrower to any secured creditor
consequent upon which the account of such borrower is classified as non- performing asset in
the books of account of the secured creditor; or
ii. Non-payment of any debt or any other amount payable by the borrower with respect to debt
securities after notice of ninety days demanding payment of dues served upon such borrower
by the debenture trustee or any other authority in whose favor security interest is created for
the benefit of holders of such debt securities. [Section2(j)]
Conditions for calling default under this act is:
• Debt or any other amount- The amount due should be in the nature of debt.
• Secured creditor- An unsecured creditor doesn’t have recourse to this act
• Classification of NPA- A stressed asset which is yet to be classified as NPA cannot be resolved
through this act.
• For non-payment of debenture or bonds to be called default, a notice of 90 days is a pre-requisite
by the debenture trustee or beneficiary of the security
“Debt” shall have the meaning assigned to it in clause (g) of section 2 of the Recovery of Debts
Due to Banks and Financial Institutions Act, 1993 and includes—
a) Unpaid portion of the purchase price of any tangible asset given on hire or financial lease or
conditional sale or under any other contract;
b) Any right, title or interest on any intangible asset or license or assignment of such intangible
asset, which secures the obligation to pay any unpaid portion of the purchase price of such
intangible asset or an obligation incurred or credit otherwise extended to enable any
borrower to acquire the intangible asset or obtain license of such asset; [Section 2(ha)]
“financial asset” means debt or receivables and includes-
Significance: An asset which is not a financial asset cannot be securitized, acquired or transferred under this Act.

a. A claim to any debt or receivables or part thereof, whether secured or unsecured; or

b. Any debtor receivables secured by, mortgage of, or charge on immovable property; or
c. Mortgage, charge, hypothecation or pledge of movable property; or
d. Any right or interest in the security, whether full or part underlying such debt or receivables;
or
e. Any beneficial interest in property, whether movable or immovable, or in such debt,
receivables, whether such interest is existing, future, accruing, conditional or contingent; or
f. Any beneficial right, title or interest in any tangible asset given on hire or financial lease or
conditional sale or under any other contract which secures the obligation to pay any unpaid
portion of the purchase price of such asset or an obligation incurred or credit otherwise
provided to enable the borrower to acquire such tangible asset; or
g. Any right, title or interest on any intangible asset or license or assignment of such
intangible asset, which secures the obligation to pay any unpaid portion of the purchase
price of such intangible asset or an obligation incurred or credit otherwise extended to
enable the borrower to acquire such intangible asset or obtain license of the intangible
asset;
h. Any financial assistance; [Section 2(l)]
“Non-performing asset (NPA)” means an asset or account of a borrower, which has been
classified by a bank or financial institution as sub-standard, doubtful or loss asset,
Note:(Please refer to RBI Norms as to classification)
a) In case such bank or financial institution is administered or regulated by an authority or body
established, constituted or appointed by any law for the time being in force, in accordance
with the directions or guidelines relating to assets classifications issued by such authority or
body;
b) In any other case, in accordance with the directions or guidelines relating to assets
classifications issued by the Reserve Bank. [Section 2(o)]
“Qualified buyer” means a financial institution, insurance company, bank, state financial
corporation, state industrial development corporation, trustee or asset reconstruction
company which has been granted a certificate of registration under sub-section (4) of section
3 or any asset management company making investment on behalf of mutual fund or pension
fund or a foreign institutional investor registered under the Securities and Exchange Board of
India Act, 1992 (15 of 1992) or regulations made thereunder, any category of non-institutional
investors as may be specified by the Reserve Bank under sub-section (1) of section 7 or any
other body corporate as maybe specified by the Board;[Section 2(u)]
An ARC cannot raise funds from investors which is not a qualified buyer (QB) as defined above.
“Securitization” means acquisition of financial assets by any asset reconstruction company from
any originator, whether by raising of funds by such asset reconstruction company from qualified
buyers by issue of security receipts representing undivided interest in such financial assets or
otherwise [Section2(z)];
The process of securitization helps the ARC to acquire financial assets like Loans from banks due to
which the ARC shall be deemed to be the lender and all the rights of such bank or financial
institution shall vest in such company in relation to such financial assets.
“Secured creditor” means-
• Any bank or financial institution or any consortium or group of banks or financial institutions
holding any right, title or interest upon any tangible asset or intangible asset as specified in
clause(l);
• Debenture trustee appointed by any bank or financial institution; or
• An asset reconstruction company whether acting as such or managing a trust set up by such
asset reconstruction company for the securitization or reconstruction, as the case may be; or
• Debenture trustee registered with the Board appointed by any company for secured debt
securities; or
• Any other trustee holding securities on behalf of a bank or financial institution,
In whose favour security interest is created by any borrower for due repayment of any financial
assistance [section 2(zd)]
“Security interest” means right, title and interest of any kind, other than those specified in
section31, upon property created in favor of any secured creditor and includes—
a) Any mortgage, charge, hypothecation, assignment or any right, title or interest of any kind, on
tangible asset, retained by the secured creditor as an owner of the property, given on hire or
financial lease or conditional sale or under any other contract which secures the obligation to
pay any unpaid portion of the purchase price of the asset or an obligation incurred or credit
provided to enable the borrower to acquire the tangible asset; or
b) Such right, title or interest in any intangible asset or assignment or license of such intangible
asset which secures the obligation to pay any unpaid portion of the purchase price of the
intangible asset or the obligation incurred or any credit provided to enable the borrower to
acquire the intangible asset or license of intangible asset [Section2(zf)];
A creditor shall not be called as secured creditor unless its interest over the assets of the debtor or
borrower is covered under the above definition. Refer section 31 (Provisions of this Act not to apply in
certain cases) for specific exclusions of rights that shall not be treated as security interest.
 REGULATION OF SECURITIZATION AND
RECONSTRUCTION OF FINANCIAL ASSETS OF
BANKS AND FINANCIAL INSTITUTIONS
• This part of the Act is covered in chapter II of the Act, comprising of Sections 3 – 12. This chapter
provides for regulation of securitization and reconstruction of financial assets of banks and
financial institutions.
 Registration of ARCs (Section3)
• Commencement of business of securitization or asset reconstruction: Such a company can
commence or carry on the business of securitization or asset reconstruction only after obtaining
a certificate of registration granted under this section and having the net owned fund of not less
than one hundred crore rupees or such other higher amount as the Reserve Bank, may, by
notification, specify.
However, the term “net owned fund” is not defined in the Act and hence we have to refer to the
definition of “net owned fund” as mentioned in the explanation to Section 45I of the Reserve Bank of
India Act.
• Conditions: Power of RBI to inspect Books and Records of ARC
The Reserve Bank may, for the purpose of considering to grant its approval for the application for
registration of an ARC to commence or carry on the business of securitization or asset
reconstruction, as the case may be, require to be satisfied, by an inspection of records or books
of such ARC, or otherwise, that the following conditions are fulfilled, namely:-
i. That the ARC has not incurred losses in any of the three preceding financial years;
ii. That such ARC has made adequate arrangements for realization of the financial assets
acquired for the purpose of securitization or asset reconstruction and shall be able to pay
periodical returns and redeem on respective due dates on the investments made in the
company by the qualified buyers or other persons;
iii. That the directors of ARC have adequate professional experience in matters related to finance,
securitization and reconstruction;
iv. That any of its directors has not been convicted of any offence involving moral turpitude;
v. That a sponsor of an ARC is a fit and proper person in accordance with the criteria as may be
specified in the guidelines issued by the Reserve Bank for such persons;
vi. That ARC has complied with or is in a position to comply with prudential norms specified by the
Reserve Bank.
vii. That ARC has complied with one or more conditions specified in the guidelines issued by the
Reserve Bank for the said purpose.
• Issue of certificate of registration to ARC: A certificate of registration is thereafter granted to
the ARC to commence or carry on business of securitization or asset reconstruction, and it must
be noted that the Reserve Bank may also prescribe any other conditions, which it may consider,
fit to impose. In case the Reserve Bank is of the opinion that the above conditions are not
satisfied then it may reject the application, after the applicant is given a reasonable opportunity
of being heard.
• Requirement of prior approval of RBI in case of change: Once a company is registered
as an ARC, it must obtain prior approval of the Reserve Bank for the following purposes:-
a. Any substantial change in its management, including appointment of any director
managing
b. Director or chief executive officer
c. Change of location of its registered office
d. Change in its name
• Decision of RBI shall be final & binding: The decision of the Reserve Bank, whether the
change in management of an ARC is a substantial change in its management or not, shall
be final and binding. The expression “substantial change in management” means the
change in the management by way of transfer of shares or change affecting the
sponsorship in the company by way of transfer of shares or amalgamation or transfer of
the business of the company.
 Cancellation of certificate of registration (Section4)
• The Reserve Bank may cancel a certificate of registration granted to an ARC, if such company-
i. Ceases to carry on the business of securitization or asset reconstruction; or
ii. Ceases to receive or hold any investment from a qualified buyer; or
iii. Has failed to comply with any conditions subject to which the certificate of registration has been
granted to it; or
iv. At any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub- section (3)
of section 3;or
v. Fails to-
a. Comply with any direction issued by the Reserve Bank under the provisions of this Act; or
b. Maintain accounts in accordance with the requirements of any law or any direction or order
issued by the Reserve Bank under the provisions of this Act; or
c) Submit or offer for inspection its books of account or other relevant documents when so
demanded by the Reserve Bank; or
d) Obtain prior approval of the Reserve Bank required under sub-section (6) of section3:
• Before cancelling a certificate of registration on the ground that the ARC has failed to comply with
the provisions of clause (c) or has failed to fulfil any of the conditions referred to in clause (d) or
sub- clause (iv) of clause (e), the Reserve Bank, unless it is of the opinion that the delay in
cancelling the certificate of registration granted under sub-section (4) of section 3 shall be
prejudicial to the public interest or the interests of the investors or the ARC, shall give an
opportunity to such company on such terms as the Reserve Bank may specify for taking necessary
steps to comply with such provisions or fulfillment of such conditions . Indirectly it implies that
cancellation may be immediate as well.
• Appeal to an order of cancellation: In case the ARC is aggrieved by the order of cancellation of
certificate of registration by the Reserve Bank, then it may prefer an appeal, within a period of
thirty days from the date on which such order of cancellation is communicated to it, to the Central
Government (Secretary, Ministry of Finance, and Government of India). The Central Government
must also give such company a reasonable opportunity of being heard before rejecting the appeal.
• It must be noted that an ARC, which is holding investments of qualified buyers and whose
application for grant of certificate of registration has been rejected or certificate of
registration has been cancelled shall, notwithstanding such rejection or cancellation be
deemed to be an ARC until it repays the entire investments held by it (together with interest,
if any) within such period as specified by the Reserve Bank.
 Acquisition of rights or interest in financial assets (Section 5)
• Acquiring of financial assets of any bank or financial institution: Notwithstanding anything
contained in any agreement or any other law for the time being in force, any ARC may acquire
financial assets of any bank or financial institution-
i. By issuing a debenture or bond or any other security in the nature of debenture, for
consideration agreed upon between such company and the bank or financial institution,
incorporating therein such terms and conditions as may be agreed upon between them; or
ii. By entering into an agreement with such bank or financial institution for the transfer of
such financial assets to such company on such terms and conditions as may be agreed
upon between them
• Any document executed by any bank or financial institution as mentioned above, in favour of the ARC
acquiring financial assets for the purposes of asset reconstruction or securitization shall be exempted
from stamp duty in accordance with the provisions of section 8F of the Indian Stamp Act, 1899
Provided that the provisions of this sub-section shall not apply where the acquisition of the financial
assets by the asset reconstruction company is for the purposes other than asset reconstruction or
securitization.
Such exemption is provided in order to encourage banks or FIs to resolve non-performing assets (NPA)
issues by offloading it to ARCs.
• Debenture in common parlance is an acknowledgement of debt. Bond also refers to the same nature of
instrument as a debenture. Both of them acknowledge a debt and hence an obligation to pay.
• Stepping into the shoes of the Bank-Both rights and liabilities including suits and appeals
• In case where bank or financial institution is a lender in relation to any financial assets acquired by the
ARC: Then such ARC shall, on such acquisition, be deemed to be the lender and all the rights of such
bank or financial institution shall vest in such company in relation to the subject financial assets.
• If the bank or financial institution is holding any right, title or interest upon any tangible asset or
intangible asset to secure payment of any unpaid portion of the purchase price of such asset or an
obligation incurred or credit otherwise provided to enable the borrower to acquire the tangible
asset or assignment or license of intangible asset, such right, title or interest shall vest in the
asset reconstruction company on acquisition of such assets.
• All contracts, deeds, bonds, agreements, powers-of-attorney, grants of legal representation,
permissions, approvals, consents or no-objections under any law or otherwise and other
instruments of whatever nature which relate to the said financial asset and which are subsisting
or having effect immediately before the acquisition of financial asset and to which the concerned
bank or financial institution is a party or which are in favour of such bank or financial institution
shall, after the acquisition of the financial assets, be of as full force and effect against or in favour
of the ARC, as the case may be, and may be enforced or acted upon as fully and effectually as if, in
the place of the said bank or financial institution, securitisation company or reconstruction
company, as the case may be, had been a party thereto or as if they had been issued in favour of
ARC, as the case may be.
• If, on the date of acquisition of financial asset, any suit, appeal or other proceeding of
whatever nature relating to the said financial asset is pending by or against the bank or
financial institution, save as provided in the third proviso to sub-section (1) of section 15 of the
Sick Industrial Companies (Special Provisions) Act, 1985 the same shall not abate, or be
discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial
asset by the ARC, as the case may be, but the suit, appeal or other proceeding may be
continued, prosecuted and enforced by or against the ARC, as the case may be.
• On acquisition of financial assets, the ARC, may with the consent of the originator, file an
application before the Debts Recovery Tribunal or the Appellate Tribunal or any court or other
Authority for the purpose of substitution of its name in any pending suit, appeal or other
proceedings and on receipt of such application, such Debts Recovery Tribunal or the Appellate
Tribunal or court or Authority shall pass orders for the substitution of the ARC in such
pending suit, appeal or other proceedings
Transfer of pending applications to any one of debts Recovery Tribunals in certain cases
(Section 5A)-Clubbing of applications filed
• If any financial asset, of a borrower acquired by an ARC, comprise of secured debts or more than
one bank or financial institution for recovery of which such banks or financial institutions has filed
applications before two or more Debts Recovery Tribunals, the ARC may file an application to the
Appellate Tribunal having jurisdiction over any of such Tribunals in which such applications are
pending for transfer of all pending applications to any one of the Debts Recovery Tribunals as it
deems fit.
• On receipt of such application for transfer of all pending applications under sub-section (1), the
Appellate Tribunal may, after giving the parties to the application an opportunity of being heard,
pass an order for transfer of the pending applications to any one of the Debts Recovery Tribunals.
• Notwithstanding anything contained in the Recovery of Debts Due to Banks and Financial
Institutions Act, 1993, any order passed by the Appellate Tribunal under sub-section (2) shall be
binding on all the Debts Recovery Tribunals referred to in sub-section (1) as if such order had been
passed by the Appellate Tribunal having jurisdiction on each such Debts Recovery Tribunal.
• Any recovery certificate, issued by the Debts Recovery Tribunal to which all the pending
applications are transferred under sub-section (2), shall be executed in accordance with the
provisions contained in sub-section (23) of section 19 and other provisions of the Recovery
of Debts Due to Banks and Financial Institutions Act, 1993 shall, accordingly, apply to such
execution.
Notice to obligor and discharge of obligation of such obligor (Section 6)
• The bank or financial institution may give a notice of acquisition of financial assets by any
ARC to the concerned obligor and any other concerned person and to the concerned
registering authority.
• The obligor shall make payment to the concerned ARC in discharge of any of the obligations
in relation to the financial asset specified in the notice.
Issue of security by raising of receipts or funds by ARC (Section7)
• Any ARC, may, after acquisition of any financial asset under Section 5(1), offer security receipts
to qualified buyers (or such other category of investors including non-institutional investors as
may be specified by the Reserve Bank in consultation with the Board, from time to time) for
subscription in accordance with the provisions of those Acts.
• An ARC may raise funds from the qualified buyers by formulating schemes for acquiring financial
assets and shall keep and maintain separate and distinct accounts in respect of each such
scheme for every financial asset acquired out of investments made by a qualified buyer and
ensure that realizations of such financial asset is held and applied towards redemption of
investments and payment of returns assured on such investments under the relevant scheme.
Exemption from registration of security receipt (Section 8)
• Any security receipt issued by the ARC and not creating, declaring, assigning, limiting or
extinguishing any right, title or interest, to or in immovable property except in so far as it
entitles the holder of the security receipt to an undivided interest afforded by a registered
instrument, or any transfer of security receipts, shall not require compulsory registration under
section 17 of the Registration Act, 1908.
Measures for assets reconstruction (Section 9)
• AN ARC may, provide for any one or more of the following measures, for the purposes of asset
reconstruction-
• The proper management of the business of the borrower, by change in, or takeover of the
management of the business of the borrower;
• The sale or lease of a part or whole of the business of the borrower;
• Rescheduling of payment of debts payable by the borrower;
• Enforcement of security interest in accordance with the provisions of this Act;
• Settlement of dues payable by the borrower;
• Taking possession of secured assets in accordance with the provisions of this Act;
• Conversion of any portion of debt into shares of a borrower company:
• Provided that conversion of any part of debt into shares of a borrower company shall be deemed
always to have been valid, as if the provisions of this clause were in force at all material times.
• The Reserve Bank shall, for the purposes as given above, determine the policy and issue
necessary directions including the direction for regulation of management of the business of the
borrower and fees to be charged.
• The asset reconstruction company shall take measures in accordance with policies and
directions of the Reserve Bank determined under Section 9 (2).
 Other functions of ARC (Section10)
• Any ARC may-
i. Act as an agent for any bank or financial institution for the purpose of recovering their dues
from the borrower on payment of such fees or charges as may be mutually agreed upon
between the parties;
ii. Act as a manager referred to section 13(4)(c) on such fee as may be mutually agreed upon
between the parties;
iii. Act as receiver if appointed by any court or tribunal
Provided that no ARC shall act as a manager if acting as such gives rise to any pecuniary liability.
• No ARC which has been granted a certificate of registration section 3(4) shall commence or
carry on, without prior approval of the Reserve Bank, any business other than that of
securitization or asset reconstruction.
Provided that an ARC which is carrying on, on or before the commencement of this Act, any
business other than the business of securitization or asset reconstruction or business referred
to in sub-section (1), shall cease to carry on any such business within one year from the date of
commencement of this Act.
• For the purposes of this section, ARC does not include its subsidiary.
 Resolution of disputes (Section11) between Bank ,FI, ARC, QIB through Arbitration and
Conciliation
Where any dispute relating to securitisation or reconstruction or non-payment of any amount
due including interest arises amongst any of the parties, namely,
• The bank, or
• Financial institution, or
• ARC or
• Qualified buyer,
Such dispute shall be settled by conciliation or arbitration as provided in the Arbitration and Conciliation
Act, 1996, as if the parties to the dispute have consented in writing for determination of such dispute by
conciliation or arbitration and the provisions of that Act shall apply accordingly.
 Power of Reserve Bank to determine policy and issue directions (Section 12)-RBI is MIL of ARC

• In the public interest, Reserve bank may determine the policy and give directions to any ARC in
matters relating to income recognition, accounting standards, making provisions for bad and doubtful
debts, capital adequacy based on risk weights for assets and also relating to deployment of funds by
the ARC.
• Without prejudice to the generality as above, the Reserve bank may give directions to any ARC in
particular as to:
• The type of financial asset of a bank or Financial institution which can be acquired and
procedure for acquisition of such assets and valuation thereof;
• The aggregate value of financial assets which may be acquired by any securitisation company or
reconstruction company.
• The fee and other charges which may be charged or incurred for management of financial
assets acquired by any asset reconstruction company;
• Transfer of security receipts issued to qualified buyers
 Power of Reserve Bank to Call for Statements and information (Section12A)
• The Reserve Bank may direct ARC to furnish it within such time as may be specified by the
Reserve Bank, with such statements and information relating to the business or affairs of such
securitisation company or reconstruction company (including any business or affairs with which
such company is concerned) as the Reserve Bank may consider necessary or expedient to
obtain for the purpose of this Act.
 Power of Reserve Bank to carry out audit and inspection (Section12B)
• The Reserve Bank may, for the purposes of this Act, carry out or cause to be carried out
audit and inspection of an asset reconstruction company from time to time.
• It shall be the duty of an asset reconstruction company and its officers to provide
assistance and cooperation to the Reserve Bank to carry out audit or inspection.
• Where on audit or inspection or otherwise, the Reserve Bank is satisfied that business of
an asset reconstruction company is being conducted in a manner detrimental to public
interest or to the interests of investors in security receipts issued by such asset
reconstruction company, the Reserve Bank may, for securing proper management of an
asset reconstruction company, by an order—
i. remove the Chairman or any director or appoint additional directors on the board of
directors of the asset reconstruction company; or
ii. appoint any of its officers as an observer to observe the working of the board of
directors of such asset reconstruction company:
• Provided that no order for removal of Chairman or director under clause (a) shall be made
except after giving him an opportunity of being heard.
• It shall be the duty of every director or other officer or employee of the asset reconstruction
company to produce before the person, conducting an audit or inspection under sub-section (1),
all such books, accounts and other documents in his custody or control and to provide him such
statements and information relating to the affairs of the asset reconstruction company as may
be required by such person within the stipulated time specified by him.
 ENFORCEMENT OF SECURITIZATION
• Provisions dealing with enforcement of security interest are contained in Chapter III of the Act,
comprising of Sections 13 – 19.
 Enforcement of security interest (Section13)
• Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act,
1882, any security interest created in favour of any secured creditor may be enforced, without
the intervention of the court or tribunal, by such creditor in accordance with the provisions of
this Act.
• Where borrower makes a default payment of debt: Where any borrower, who is under a
liability to a secured creditor under a security agreement, makes any default in repayment of
secured debt or any instalment thereof, and his account in respect of such debt is classified by
the secured creditor as non- performing asset, then, the secured creditor may require the
borrower by notice in writing to discharge in full his liabilities to the secured creditor within
Sixty days from the date of notice failing which the secured creditor shall be entitled to exercise
all or any of the rights under sub-section (4) of Section13.
Provided that –
i. The requirement of classification of secured debt as non-performing asset under this sub-
section
ii. Shall not apply to a borrower who has raised funds through issue of debt securities; and in
the event of default, the debenture trustee shall be entitled to enforce security interest in
the same manner as provided under this section with such modifications as may be
necessary and in accordance with the terms and conditions of security documents executed
in favour of the debenture trustee;
• Notice prescribing the details of the debts: This notice shall give details of the amount
payable by the borrower and the secured assets intended to be enforced by the secured
creditor in the event of non-payment of secured debts by the borrower. The procedure for the
service of the notice is prescribed in the Security Interests (Enforcement) Rules.
• Objection or rejection to the borrower on the notice: If, on receipt of the notice , the
borrower makes any representation or raises any objection, the secured creditor shall consider
such representation or objection and if the secured creditor comes to the conclusion that such
representation or objection is not acceptable or tenable, he shall communicate within 15 days of
receipt of such representation or objection the reasons for non-acceptance of the
representation or objection to the borrower:
• No right to borrower to prefer an application: Provided that the reasons so communicated or
the likely action of the secured creditor at the stage of communication of reasons shall not
confer any right upon the borrower to prefer an application to the Debts recovery Tribunal under
section 17 or the Court of District Judge under section 17A.
• Borrower fails to discharge his liability: If the borrower fails to discharge his liability in full
within the above specified period, the secured creditor may take recourse to one or more of the
following measures to recover his secured debt:-
a. Take possession of the secured assets of the borrower including the right to transfer by way of
lease, assignment or sale for realizing the secured asset;
b. Take over the management of the business of the borrower including the right to transfer by
way of lease, assignment or sale for realizing the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only
where the substantial part of the business of the borrower is held as security for the debt:
Provided further that where the management of whole of the business or part of the business is
severable, the secured creditor shall take over the management of such business of the borrower
which is relatable to the security for the debt;
c. Appoint any person (hereafter referred to as the manager), to manage the secured assets the
possession of which has been taken over by the secured creditor;
d. Require at any time by notice in writing, any person who has acquired any of the secured
assets from the borrower and from whom any money is due or may become due to the
borrower, to pay the secured creditor, so much of the money as is sufficient to pay the
secured debt.
• Modes of enforcement of security:
i. Take possession of the secured asset
ii. Take over the management (which is relatable to secured debt)
iii. Appoint any person as the manager, to manage the secured assets
iv. Demand notice to the person who has acquired the secured assets from the borrower
• Discharge from payment: Any payment made by any person referred to in section 5(4)(d) to
the secured creditor shall give such person a valid discharge as if he has made payment to the
borrower.
• Right with respect to the immovable property : Where the sale of an immovable property,
for which a reserve price has been specified, has been postponed for want of a bid of an amount
not less than such reserve price, it shall be lawful for any officer of the secured creditor, if so
authorised by the secured creditor in this behalf, to bid for the immovable property on behalf of
the secured creditor at any subsequent sale [sub-section(5A)]
Where the secured creditor, referred to in sub-section (5A), is declared to be the purchaser of
the immovable property at any subsequent sale, the amount of the purchase price shall be
adjusted towards the amount of the claim of the secured creditor for which the auction of
enforcement of security interest is taken by the secured creditor, under sub-section (4) of
section 13. [Sub-section (5B)]
The provisions of section 9 of the Banking Regulation Act, 1949 shall, as far as may be, apply to
the immovable property acquired by secured creditor under sub-section (5A). [Sub-section
(5C)]
• Right related to transfer of secured assets by the secured creditor: Any transfer of
secured asset after taking possession thereof or takeover of management under sub-section
(4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in
the transferee all rights in, or in relation to, the secured asset transferred as if the transfer
had been made by the owner of such secured asset.
• Recovery of expenses from the borrower: Where any action has been taken against a
borrower, all costs, charges and expenses which, in the opinion of the secured creditor, have
been properly incurred by him or any expenses incidental thereto, shall be recoverable from
the borrower and the money which is received by the secured creditor shall, in the absence of
any contract to the contrary, be held by him in trust, to be applied –
a) Firstly, in payment of such costs, charges and expenses and
b) Secondly, in discharge of the dues of the secured creditor and the residue of the money so
received shall be paid to the person entitled thereto in accordance with his rights and
interests.
• Payment of dues of the secured creditors: Auction ruk bhi sakti hai
Where the amount of dues of the secured creditor together with all costs, charges and
expenses incurred by him is tendered to the secured creditor at any time before the date of
publication of notice for public auction or inviting quotations or tender from public or private
treaty for transfer by way of lease, assignment or sale of the secured assets,—
a. The secured assets shall not be transferred by way of lease assignment or sale by the
secured creditor; and
b. Incase, any step has been taken by the secured creditor for transfer by way of lease or
assignment or sale of the assets before tendering of such amount under this subsection, no
further step shall be taken by such secured creditor for transfer by way of lease or
assignment or sale of such secured assets.
• Joint financing: 60% or more should agree for action . In case of liquidation.. distribution as per Section 326 of the Companies Act,2013
Subject to the provisions of the Insolvency and Bankruptcy Code, 2016, in the case of financing
of a financial asset by more than one secured creditors or joint financing of a financial asset by
secured creditors, no secured creditor shall be entitled to exercise any or all of the rights
conferred on him under or pursuant to sub-section (4) unless exercise of such right is agreed
upon by the secured creditors representing not less than sixty per cent in value of the amount
outstanding as on a record date and such action shall be binding on all the secured creditors.
[Section 13(9)]. But in case of a company in liquidation, the amount realized from the sale of
secured assets shall be distributed in accordance with the provisions of section 326 of the
Companies Act, 2013.
• No transfer of secured assets by borrower: Consent of Secured creditor necessary for transfer in case of receipt of notice
• No borrower shall, after receipt of notice, transfer by way of sale, lease or otherwise (other
than in the ordinary course of his business) any of his secured assets referred to in the notice,
without prior written consent of the secured creditor.
Chief metropolitan magistrate or district magistrate to assist secured creditor in taking
possession of secured asset (Section14)-Aunty police Bula legi
• The secured creditor may, for the purpose of taking possession or control of secured asset,
request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose
jurisdiction any such secured asset or other documents relating thereto may be situated or
found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be,
the District Magistrate shall, on such request being made to him-
i. Take possession of such asset and documents relating thereto; and
ii. Forward such asset and documents to the secured creditor within a period of thirty days
from the date of application.
Provided further that if no order is passed by the Chief Metropolitan Magistrate or District
Magistrate within the said period of thirty days for reasons beyond his control, he may, after
recording reasons in writing for the same, pass the order within such further period but not
exceeding in aggregate sixty days.
 Manner and effect of takeover of management (Section15)-by ARC or Bank by appointing director or an administrator
• Appointment of persons by secured creditors: When the management of business of a
borrower is taken over by an ARC under section 9(a) or, by a secured creditor under section
13(4) (b) as the case may be, the secured creditor may, by publishing a notice in a newspaper
published in English language and in a newspaper published in an Indian language in circulation
in the place where the principal office of the borrower is situated, appoint as many persons as
it thinks fit-
a) In a case in which the borrower is a company under the Companies Act, 2013,to be the
directors of that borrower in accordance with the provisions of that Act; or
b) In any other case, to be the administrator of the business of the borrower
• On publication notice: िसंहासन खाली करो
All persons holding office as directors of the company (if the borrower is a company) and in
any other case, all persons holding any office having power of superintendence, direction
and control of the business of the borrower immediately before the publication of the above
notice, shall be deemed to have vacated their offices.
• When any contract of management shall be deemed to be terminated: क डी म ले लो
Any contract of management between the borrower and any director or manager
thereof holding office as such immediately before publication of the above notice, shall be
deemed to be terminated. The directors or the administrators appointed under this section
shall take such steps as may be necessary to take into their custody or under their control all
the property, effects and actionable claims to which the business of the borrower is, or
appears to be, entitled and all the property and effects of the business of the borrower shall be
deemed to be in the custody of the directors or administrators, as the case may be, as from
the date of the publication of the above notice.
• Exercise of the powers of the person so appointed for the borrowers: Deeming fiction for directors or administrators

All directors appointed in accordance with the above notice shall, for all purposes, be the
directors of the company of the borrower and such directors or the administrators (if the
borrower is other than a company) appointed under section 15, shall only be entitled to
exercise all the powers of the directors or as the case may be, of the persons exercising
powers of superintendence, direction and control, of the business of the borrower whether
such powers are derived from the memorandum or articles of association of the company of
the borrower or from any other source.
• Management of borrower taken by the secured creditor: शेयर हो स की पावर कम हो गयी
Where the management of the business of a borrower, being a company as defined in
Companies Act, 2013, is taken over by the secured creditor, then, notwithstanding anything
contained, such borrower- in the said Act or in the memorandum or articles of association of
such company-
a) It shall not be lawful for the shareholders of such company or any other person to nominate
or appoint any person to be a director of the company.
b) No resolution passed at any meeting of the shareholders of such company shall be given
effect to unless approved by the secured creditor;
c) No proceeding for the winding up of such company or for the appointment of a receiver in
respect thereof shall lie in any court, except with the consent of the secured creditor.
• Obligation of secured creditor: कज़दार ने पेमट कर िदया उसके डायरे र को बैठने दो लेिकन अगर शेयर ले िलए तो िफर क ोल वािपस नही ं करगे
The secured creditor is under an obligation to restore the management of the business of the
borrower, on realization of his debt in full, in case of takeover of the management of the
business of a borrower by such secured creditor.
• Provided that if any secured creditor jointly with other secured creditors or any asset
reconstruction company or financial institution or any other assignee has converted part of
its debt into shares of a borrower company and thereby acquired controlling interest in the
borrower company, such secured creditors shall not be liable to restore the management of
the business to such borrower.
 No compensation to directors for loss of office (Section 16)-compensation for loss of office भूल जाओ हाँ कोई dues बाकी ह तो ले लो
• Irrespective of anything contained in any contract or in any other law for the time being in force,
no managing director or any other director or a manager or any person in charge of management
of the business of the borrower shall be entitled to any compensation for the loss of office or for
the premature termination under this Act. However any such managing director or any other
director or manager or any such person in charge of management has the right to recover from
the business of the borrower, moneys recoverable otherwise than by way of such compensation.
 Application against measures to recover secured debts (Section17)-To DRT within 45 days of the date of taking such measure
• Filing of an application: Any person (including borrower), aggrieved by any of the measures given
in section 13(4) taken by the secured creditor or his authorised officer under this Chapter, may
make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal
having jurisdiction in the matter within forty-five days from the date on which such measure had
been taken.
• Provided that different fees may be prescribed for making the application by the borrower and
the person other than the borrower.
• Explanation: For the removal of doubts, it is hereby declared that the communication of the
reasons to the borrower by the secured creditor for not having accepted his representation or
objection or the likely action of the secured creditor at the stage of communication of reasons
to the borrower shall not entitle the person (including borrower) to make an application to the
Debts Recovery Tribunal under this sub-section.
• Jurisdiction : An application under sub-section (1) shall be filed before the Debts Recovery
Tribunal
• Within the local limits of whose jurisdiction—
• The cause of action, wholly or in part, arises;
• Where the secured asset is located; or
• The branch or any other office of a bank or financial institution is maintaining an account in
which debt claimed is outstanding for the time being.
• Measures taken shall be in compliance: DRT to ensure this . Otherwise invalidation and restoration.
The Debts Recovery Tribunal shall consider whether any of the measures referred to in section
13(4) taken by the secured creditor for enforcement of security are in accordance with the
provisions of this Act and the rules made thereunder.
• If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and
evidence produced by the parties, comes to the conclusion that any of the measures referred to in
section 13(4), taken by the secured creditor are not in accordance with the provisions of this Act
and the rules made thereunder, and require restoration of the management or restoration of
possession, of the secured assets to the borrower or other aggrieved person, it may, by order,—
i. Declare the recourse to any one or more measures referred to in section 13(4) taken by the
secured creditor as invalid; and
ii. Restore the possession of secured assets or management of secured assets to the borrower or
such other aggrieved person, who has made an application under sub- section (1), as the case
may be; and
c) Pass such other direction as it may consider appropriate and necessary in relation to any of the
recourse taken by the secured creditor under sub-section (4) of Section 13.
• Remedies opted by the securities creditor: िकरायेदार बैठा िदया कज़दार ने तो उसको खाली करना पड़े गा
• If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-
section (4) of section 13, is in accordance with the provisions of this Act and the rules made
thereunder, then, notwithstanding anything contained in any other law for the time being in force,
the secured creditor shall be entitled to take recourse to one or more of the measures specified
under sub-section (4) of section 13 to recover his secured debt.
Where-
i. Any person, in an application under sub-section (1), claims any tenancy or leasehold rights
upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and
evidence produced by the parties in relation to such claims shall, for the purposes of
enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,—
a. Has expired or stood determined; or
b. Is contrary to section 65A of the Transfer of Property Act, 1882; or
c. Is contrary to terms of mortgage; or
d. Is created after the issuance of notice of default and demand by the Bank under sub-section
(2) of section 13 of the Act; and
• The Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured
asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub- clause (d) of
clause (i), then notwithstanding anything to the contrary contained in any other law for the time
being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance
with the provisions of this Act.
• Time limit for disposal of an application: ASAP within 60 days. Total period not to exceed 4 months. Any
application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as
expeditiously as possible and disposed of within sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for
reasons to be recorded in writing, so, however, that the total period of pendency of the application
with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such
application made under sub-section (1).
• Order by the appellate tribunal for expeditious disposal of the pending application 4 महीने के बाद DRAT जाओ
:

If the application is not disposed of by the Debts Recovery Tribunal within the period of four
months as specified in sub-section (5), any party to the application may make an application, in
such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery
Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal
and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the
pending application by the Debts Recovery Tribunal.
Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be,
dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks
and Financial Institutions Act, 1993 and the rules made thereunder.
 Making of application to Court of district Judge in certain cases (Section17A)-J&K
In the case of a borrower residing in the State of Jammu and Kashmir, the application under
section 17 shall be made to the Court of District Judge in that State having jurisdiction over the
borrower which shall pass an order on such application.
• Explanation: It is hereby declared that the communication of the reasons to the borrower by
the secured creditor for not having accepted his representation or objection or the likely action
of the secured creditor at the stage of communication of reasons shall not entitle the person
(including borrower) to make an application to the Court of District Judge under this section.
 Appeal to Appellate Tribunal (Section18)-Appeal to DRAT within 30 days
• Appeal to an order of DRT: Any person aggrieved, by any order made by the Debts Recovery
Tribunal under section 17, may prefer an appeal along with such fee, as may be prescribed to the
Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery
Tribunal.
• Provided that different fees may be prescribed for filing an appeal by the borrower or by the
person other than the borrower;
• Condition for the appeal: अपील से पहले 50 % जमा करवाओ. चलो 25 % करवा दो
Provided further that no appeal shall be entertained unless the borrower has deposited with the Appellate
Tribunal fifty per cent of the amount of debt due from him, as claimed by the secured creditors or
determined by the Debts Recovery Tribunal, whichever is less. Provided also that the Appellate Tribunal
may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent of
debt referred above.
• Dispose of appeal as per the RDDBFI Act, 1993: Save as otherwise provided in this Act, the Debts
Recovery Tribunal under section 17 or the Appellate Tribunal under section 18 shall, as far as may be,
dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to Banks and
Financial Institutions Act (RDDBFI), 1993and rules made thereunder.
 Validation of fees levied (Section 18A)-2004 से पहले वाली फीस एडज कर लो
Any fee levied and collected for preferring an appeal to the Debts Recovery Tribunal or the Appellate
Tribunal under this Act, before the commencement of the Enforcement of Security Interest and Recovery
of Debts Laws (Amendment) Act, 2004, shall be deemed always to have been levied and collected in
accordance with law as if the amendments made to sections17 and 18 of this Act by sections 10 and 12 of
the said Act were in force at all material times.
 Appeal to High Court in certain cases (Section18B)-J&K
• Any borrower residing in the State of Jammu and Kashmir and aggrieved by any order made by
the Court of District Judge under section17A-may prefer an appeal, to the High Court having
jurisdiction over such Court, within thirty days from the date of receipt of the order of the Court
of District Judge.
• Requirement for preferring an appeal: अपील से पहले 50 % जमा करवाओ. चलो 25 % करवा दो
No appeal shall be preferred unless the borrower has deposited, with the Jammu and
Kashmir High Court, fifty per cent of the amount of the debt due from him as claimed by the
secured creditor or determined by the Court of District Judge, whichever is less. Provided further
that the High Court may, for the reasons to be recorded in writing, reduce the amount to not less
than twenty-five per cent. Of the debt referred here.
 Right to lodge a caveat (Section18C)-पेचे म लंगर डालना जज साहब अपील की सुनवाई म मुझे भी मौका दे ना

• Filing of a caveat: Where an application or an appeal is expected to be made or has been made
under section17(1) or section17A or section18(1) or section18B.
a) The secured creditor, or
b) Any person claiming a right to appear before the Tribunal or the Court of District Judge or
the Appellate Tribunal or the High Court, as the case may be, on the hearing of such
application or appeal, may lodge a caveat in respect thereof.
• Notice of caveat: Where a caveat has been lodged –लंगर डाल िदया तो रिज ड AD नोिटस दो दू सरी पाट को
a) The secured creditor by whom the caveat has been lodged (hereafter in this section
referred to as the caveator) shall serve notice of the caveat by registered post,
acknowledgement due, on the person by whom the application has been or is expected to be
made.
b) Any person by whom the caveat has been lodged (hereafter in this section referred to as the
caveat or) shall serve notice of the caveat by registered post, acknowledgement due, on the
person by whom the application has been or is expected to be made.
• Notice on the caveat or by adjudicating authority: जज साहेब भी बुलाएँ गे लंगर डालने वाले को
Where after a caveat has been lodged, any application or appeal is filed before the Tribunal or the
court of District Judge or the Appellate Tribunal or the High Court, as the case may be, the Tribunal
or the District Judge or the Appellate Tribunal or the High Court, as the case may be, shall serve a
notice of application or appeal filed by the applicant or the appellant on the caveator.
• Furnishing of copy of application and documents: ए कट cc लंगर डालने वाले को भी करे गा
Where a notice of any caveat has been served on the applicant or the Appellant, he shall
periodically furnish the caveator with a copy of the application or the appeal made by him and also
with copies of any paper or document which has been or may be filed by him in support of the
application or the appeal.
• Validity of period of caveat: लंगर 90 िदन तक Where a caveat has been lodged, such caveat shall
not remain in force after the expiry of the period of ninety days from the date on which it was
lodged unless the application or appeal has been made before the expiry of the period.
 Right of borrower to receive compensation and costs in certain cases (Section19)
गलत possession म कज़दार को भरपाई काअिधकार

• If the Debts Recovery Tribunal or the Court of District Judge, on an application made under
section 17 or section 17A or the Appellate Tribunal or the High Court on an appeal preferred
under section 18 or section 18A, holds that the possession of secured assets by the secured
creditor is not in accordance with the provisions of this Act and rules made thereunder, and
• Directs the secured creditors to return such secured assets to concerned borrowers or any
other aggrieved person, who has filed the application under section 17 or section 17A or appeal
under section 18 or section18A, as the case may be,
• The borrower or such other person shall be entitled to the payment of such compensation and
costs as may be determined by such Tribunal or Court of District Judge or Appellate Tribunal or
the High Court referred to in section18B.
 CENTRAL REGISTRY
• The provisions related to Central Registry is contained in chapter IV of the Act. It covers
Sections 20 to 26 of the Act.
 Central Registry (Section20)
• Setup of Central Registry: The Central Government may, by notification, set up or cause to be
set up from such date as it may specify in such notification, a registry to be known as the
Central Registry with its own seal for the purposes of registration of transaction of
securitization and reconstruction of financial assets and creation of security interest under this
Act.
• The head office of the Central Registry shall be at such place as the Central Government may
specify and for the purpose of facilitating registration of transactions referred above, there
may be established at such other places as the Central Government may think fit, branch offices
of the Central Registry.
• Central Government notifies territorial jurisdiction of the Central Registry: The Central
Government may, by notification, define the territorial limits within which an office of the
Central Registry may exercise its functions. The provisions of this Act pertaining to the Central
Registry shall be in addition to and not in derogation of any of the provisions contained in the
Registration Act, 1908, the Companies Act, 2013, the Merchant Shipping Act, 1958, the Patents
Act, 1970, the Motor Vehicles Act, 1988 and the Designs Act, 2000 or any other law requiring
registration of charges and shall not affect the priority of charges or validity thereof under
those Acts or laws.
Central Registry of Securitization Asset Reconstruction and Security Interest of India is a
Government of India Company licensed under section 8 of the Companies Act, 2013 with Govt. of
India having a shareholding of 51% by the Central Government and select Public Sector Banks and
the National Housing Bank also being shareholders of the Company.
• The object of the company is to maintain and operate a Registration System for the purpose of
registration of transactions of securitisation, asset reconstruction of financial assets and
creation of security interest over property, as envisaged in the SARFAESI Act.
Integration of registration systems with Central Registry (Section20A)
• The Central Government may, for the purpose of providing a Central database, in consultation
with State Governments or other authorities operating registration system for recording rights
over any property or creation, modification or satisfaction of any security interest on such
property, integrate the registration records of such registration systems with the records of
Central Registry established under section 20, in such manner as may be prescribed.
• The Central Government shall after integration of records of various registration systems
referred with the Central Registry, by notification, declare the date of integration of registration
systems and the date from which such integrated records shall be available; and with effect from
such date, security interests over properties which are registered under any registration system
referred shall be deemed to be registered with the Central Registry for the purposes of this Act.
Delegation of powers (Section20B)
• The Central Government may, by notification, delegate its powers and functions under this
Chapter, in relation to establishment, operations and regulation of the Central Registry to the
Reserve Bank, subject to such terms and conditions as may be prescribed.
Central Registrar (Section21)
• The Central Government may, by notification, appoint a person for the purpose of registration of
transactions relating to securitisation, reconstruction of financial assets and security interest
created over properties, who shall be known as the Central Registrar.
• The Central Government may appoint such other officers with such designations as it thinks fit
for the purpose of discharging, under the superintendence and direction of the Central
Registrar, such functions of the Central Registrar under this Act as he may, from time to time,
authorize them to discharge.
Register of securitization, reconstruction and security interest transactions
(Section22)
• A record called the Central Register shall be kept at the head office of the Central Registry for
entering the particulars of the transactions relating to-
a. Securitisation of financial assets;
b) Rreconstruction of financial assets;
c) Creation of security interest
• The Central Registrar can keep the records wholly or partly in computer, floppies, diskettes or in
any other electronic form subject to the prescribed safeguards. Records kept in these form shall
also form a part of the Central Register. The register shall be kept under the control and
management of the Central Registrar.
Filing of transactions of securitization, reconstruction and creation of security interest
• The particulars of every transaction of securitization, asset reconstruction or creation of
security interest shall be filed, with the Central Registrar in the prescribed manner and on
payment of the prescribed fees, [Section23(1)]
• Provided that the Central Government may, by notification, require registration of all
transactions of securitization, or asset reconstruction or creation of security interest which are
subsisting on or before the date of establishment of the Central Registry under section 20(1)
within such period and on payment of such fees as may be prescribed.
• The Central Government may, by notification, require the registration of transaction relating to
different types of security interest created on different kinds of property with the Central
Registry [Section23(2)]
• The Central Government may, by rules, prescribe forms for registration for different types of
security interest under this section and fee to be charged for such registration.
 Modification of security interest registered under this Act (Section24)
• Whenever the terms or conditions, or the extent or operation, of any security interest
registered under this Chapter, are, or is, modified it shall be the duty of the ARC to send to the
Central Registrar, the particulars of such modification.
 ARC or secured creditor to report satisfaction of security interest (Section25)
• The ARC or the secured creditor as the case may be, shall give intimation to the Central
Registrar of the payment or satisfaction in full, of any security interest relating to the ARC or
the secured creditor and requiring registration under this Chapter, within thirty days from the
date of such payment or satisfaction.
• On receipt on intimation, the Central Government shall order that a memorandum of satisfaction
shall be entered in the Central Registry.
Right to inspect particulars of securitisation, reconstruction and security interest
transactions (Section26)
• The particulars of securitization or reconstruction or security interest entered in the Central
Register of such transactions kept under section 22 shall be open during the business hours for
inspection by any person on payment of such fee as may be prescribed.
 RECTIFICATION BY CENTRAL GOVERNMENT IN
MATTER OF REGISTERATION , MODIFICATION
AND SATISFACTION (SECTION 26A)
• The Central Government, on being satisfied-
d) That the omission to file with the Registrar the particulars of any transaction of
securitization, asset reconstruction or security interest or modification or satisfaction of
such transaction or; the omission or mis-statement of any particular with respect to any
such transaction or modification or with respect to any satisfaction or other entry made in
pursuance of section23 or section24 or section25 of the principal Act was accidental or due
to inadvertence or some other sufficient cause or it is not of a nature to prejudice the
position of creditors; or
e) That on other grounds, it is just and equitable to grant relief,
May, on the application of a secured creditor or securitization company or reconstruction
company or any other person interested on such terms and conditions as it may seem to the
Central Government just and expedient, direct that the time for filing of the particulars of the
transaction for registration or modification or satisfaction shall be extended or, as the case may
require, the omission or mis-statement shall be rectified.
• Where the Central Government extends the time for the registration of transaction of security
interest or securitization or asset reconstruction or modification or satisfaction thereof, the
order shall not prejudice any rights acquired in respect of the property concerned or financial
asset before the transaction is actually registered.”
 REGISTERATION BY SECURED
CREDITORS AND OTHER CREDITORS
• The government has introduced new provisions in the form of Chapter IVA in order to
encourage registration of security interest by the secured creditors, which shall facilitate
uniformity, completeness and transparency in the status of security interest of the creditors
over the borrower’s assets.
 Registration by secured creditors and other creditors (Section26B)
• The Central Government may by notification, extend the provisions of Chapter IV relating to
Central Registry to all creditors other than secured creditors as defined in clause (zd) of
section 2(1), for creation, modification or satisfaction of any security interest over any property
of the borrower for the purpose of securing due repayment of any financial assistance granted
by such creditor to the borrower.
• From the date of notification, any creditor including the secured creditor may file particulars of
transactions of creation, modification or satisfaction of any security interest with the Central Registry in
such form and manner as may be prescribed.
• unsecured creditor भी रिज र कर सकता है ले िकन उसको इस ए का बेिनिफट नहीं िमले गा
• However A creditor other than the secured creditor filing particulars of transactions of creation,
modification and satisfaction of security interest over properties created in its favour shall not be entitled
to exercise any right of enforcement of securities under this Act.

• अटै चमट आडर के भी particulars रिज र करवाओ

• Every authority or officer of the Central Government or any State Government or local authority, entrusted
with the function of recovery of tax or other Government dues and for issuing any order for attachment of
any property of any person liable to pay the tax or Government dues, shall file with the Central Registry such
attachment order with particulars of the assesse and details of tax or other Government dues from such
date as may be notified by the Central Government, in such form and manner as may be prescribed.
• अटै चमट आडर म ेम िमला?ऑडर की कॉपी फीस के साथ जमा करवाओ Also if any person, having any claim against
any borrower, obtains orders for attachment of property from any court or other authority empowered to
issue attachment order, such person may file particulars of such attachment orders with Central Registry
in such form and manner on payment of such fee as may be prescribed.
 Effect of the registration of transactions, etc. (Section26C)
• Any registration of transactions of creation, modification or satisfaction of security interest by a
secured creditor or other creditor or filing of attachment orders under this Chapter shall be
deemed to constitute a public notice from the date and time of filing of particulars of such
transaction with the Central Registry.
• रिज र की यी टां स को बेिनिफट िमले गा िकसी भी subsequent टांसफर के मु क़ाबले Where security interest or
attachment order upon any property in favour of the secured creditor or any other creditor are
filed for the purpose of registration, the claim of such secured creditor or other creditor holding
attachment order shall have priority over any subsequent security interest created upon such
property and any transfer by way of sale, lease or assignment or license of such property or
attachment order subsequent to such registration, shall be subject to such claim:
Provided that nothing contained in this sub-section shall apply to transactions carried on by the
borrower in the ordinary course of business.
 Right of enforcement of securities (Section26d) -No Registeration , no enforcement
• No secured creditor shall be entitled to exercise the rights of enforcement of securities under
Chapter III unless the security interest created in its favour by the borrower has been
registered with the Central Registry.
 Priority to secured creditors (Section26e)-Priority over Govt Dues except under IBC
• After the registration of security interest, the debts due to any secured creditor shall be paid in
priority over all other debts and all revenues, taxes, cesses and other rates payable to the
Central Government or State Government or local authority.
• However such priority shall be subject to the provisions of the Insolvency and Bankruptcy Code,
2016, where insolvency or bankruptcy proceedings are pending in respect of secured assets of
the borrower.
 OFFENCES AND PENALTIES
• This chapter V of the Act provides for the offences and penalties for the commission of
default in filing of particulars of every transaction of securitization, asset reconstruction or
creation of security interest with Central registry. This chapter covers section 27 to 30 of
the Act.
 Penalties (Section27)
If a default is made-
a) In filing under section 23, the particulars of every transaction of any securitization or
asset reconstruction or security interest created by an ARC or secured creditors; or
b) In sending under section 24, the particulars of the modification referred to in that section;
or
c) In giving intimation under Section 25, then, every company and every officer of the company or
the secured creditors and every officer of the secured creditor who is in default shall be
punishable with fine which may extend to five thousand rupees for everyday during which the
default continues.-5000 every day
Provided that provisions of this section shall be deemed to have been omitted from the date of
coming into force of the provisions of this Chapter and section 23 as amended by the Enforcement
of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act,
2016
 Offences (Section29)
• If any Person:-
i. Contravenes or
ii. Attempts to contravene or
iii. Abets the contravention of the provisions of this Act or of any rules made thereunder, he shall
be punishable with imprisonment for a term which may extend to one year, or with fine, or
with both.
 Cognizance of offence (Section30)-Only on Receipt of Complaint from officer of RBI or Central Registry
• No court shall take cognizance of any offence punishable under section 27 in relation to non-
compliance with the provisions of section 23, section 24 or section 25 or under section 28 or section
29 or any other provisions of the Act, except upon a complaint in writing made by an officer of the
Central Registry or an officer of the Reserve Bank, generally or specially authorized in writing in this
behalf by the Central Registrar or, as the case may be, the Reserve Bank.
• No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall
try any offence punishable under this Act.
 Power of adjudicating authority to impose penalty (Section30A)
• Where any asset reconstruction company or any person fails to comply with any direction issued by
the Reserve Bank under this Act the adjudicating authority may, by an order, impose on such company
or person in default, a penalty not exceeding one crore rupees or twice the amount involved in such
failure where such amount is quantifiable, whichever is more, and where such failure is a continuing
one, a further penalty which may extend to one lakh rupees for everyday, after the first, during which
such failure continues.
• The adjudicating authority shall serve a notice on the asset reconstruction company or the person in
default requiring such company or person to show cause why the amount specified in the notice should
not be imposed as a penalty and a reasonable opportunity of being heard shall be given to such person.
• Any penalty imposed under this section shall be payable within a period of thirty days from the date of
issue of notice, failure of which adjudicating authority shall cancel its registration.
• No complaint shall be filed against any person in default in any court pertaining to any failure under sub-
section (1) in respect of which any penalty has been imposed and recovered by the Reserve Bank under
this section.
• Where any complaint has been filed against a person in default in the court having jurisdiction
• No proceeding for imposition of penalty against that person shall be taken under this section.
• “Adjudicating authority” means such officer or a committee of officers of the Reserve Bank, designated
as such from time to time, by notification, by the Central Board of Reserve Bank.
• “Person in default” means the asset reconstruction company or any person which has committed any
failure, contravention or default under this Act and any person in charge of such company or such other
person, as the case may be, shall be liable to be proceeded against and punished under section 33 for
such failure or contravention or default committed by such company or person.
 Appeal against penalties (Section30B)
• A person in default, aggrieved by an order passed in section 30A(4), may, within a period of
thirty days from the date on which such order is passed, prefer an appeal to the Appellate
Authority.
• Appellate Authority may entertain an appeal after the expiry of the said period of thirty days, if
it is satisfied that there was sufficient cause for not filing it within such period.
 Appellate Authority (Section30C)
• The Central Board of Reserve Bank may designate such officer or committee of officers as it
deems fit to exercise the power of Appellate Authority.
• The Appellate Authority shall have power to pass such order as it deems fit after providing a
reasonable opportunity of being heard to the person in default.
• The Appellate Authority may, by an order stay the enforcement of the order passed by the
adjudicating authority under section 30A, subject to such terms and conditions, as it deems fit.
• Where the person in default fails to comply with the terms and conditions imposed by order
without reasonable cause, the Appellate Authority may dismiss the appeal.
 Recovery of penalties (Section30d)
• Any penalty imposed under section 30A shall be recovered as a “recoverable sum” and shall be
payable within a period of thirty days from the date on which notice demanding payment of the
recoverable sum is served upon the person in default and, in the case of failure of payment by
such person within such period, the Reserve Bank may recover the sum as per the section.
 MISCELLANEOUS
• Chapter VI of the Act comprises of Miscellaneous provisions dealt under sections 31-42 of the
Act.
 Provisions of this Act not to apply uncertain cases (Section 31)
• The situations in which the provisions of this Act do not apply are as follows :
a) A lien on any goods, money or security given by or under the Indian Contract Act, 1872 or the
Sale of Goods Act, 1930 or any other law for the time being in force;
b) A pledge of movables within the meaning of section 172 of the Indian Contract Act, 1872;
c) Creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft
Act,1934;
d) Creation of security interest in any vessel as defined in clause (55) of section 3 of the
Merchant Shipping Act,1958;
e) Any rights of unpaid seller under section 47 of the Sale of Goods Act, 1930;
f) Any properties not liable to attachment (excluding the properties specifically charged with
the debt recoverable under this Act) or sale under the first proviso to sub- section(1) of
section 60 of the Code of Civil Procedure, 1908;
g) Any security interest for securing repayment of any financial asset not exceeding one lakh
rupees;
h) Any security interest created in agricultural land;
i) Any case in which the amount due is less than twenty per cent of the principal amount and
interest thereon
Provisions of the Act not to apply in some cases (Section31A)
• The Central Government may, by notification in the public interest, direct that any of the
provisions of this Act,-
a) Shall not apply to such class or classes of banks or financial institutions; or
b) Shall apply to the class or classes of banks or financial institutions with such exceptions,
modifications and adaptations, as may be specified in the notification.
• A copy of every notification proposed to be issued under sub-section (1), shall be laid in draft
before each House of Parliament, while it is in session, for a total period of thirty days, and if,
both Houses agree in disapproving the issue of notification or both Houses agree in making any
modification in the notification, the notification shall not be issued or, as the case may be, shall
be issued only in such modified form as may be agreed upon by both the Houses.
• In reckoning any such period of thirty days as is referred to in sub-section (2), no account shall
be taken of any period during which the House referred to in sub-section (2) is prolonged or
adjourned for more than four consecutive days.
• The copies of every notification issued under this section shall, as soon as may be after it has
been issued, be laid before each House of Parliament
 Protection of action taken in good faith (Section 32)
• No suit, prosecution or other legal proceedings shall lie against the Reserve Bank or the
Central Registry or any secured creditor or any of its officers for anything done or omitted to
be done in good faith under this Act.
 Offences by companies (Section 33)
• Where an offence under this Act has been committed by a company, every person who at the
time the offence was committed was in charge of, and was responsible to, the company, for the
conduct of the business of the company, as well as the company, shall be deemed to be guilty of
the offence and shall be liable to be proceeded against and punished in accordance with the
provisions of the Act.
• But if such person is able to prove that the offence was committed without his knowledge or
that he had exercised all due diligence to prevent the commission of such offence, then section
33 does not apply to such person.
• It must also be noted that, where an offence under this Act has been committed by a company
and it is proved that the offence has been committed with the consent or connivance of, or is
attributable to any neglect on the part of, any director, manager, secretary or other officer of
the company, such director, manager, secretary or other officer shall also be deemed to be
guilty of the offence and shall be liable to be proceeded against and punished in accordance with
the provisions of the Act.
• For the purposes of section 33:-
“Company’’ means any body corporate and includes a firm or other association of individuals; and
“director’’, in relation to a firm, means a partner in the firm.
 Civil Court not to have jurisdiction (Section34)
• No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter
which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to
determine and no injunction shall be granted by any court or other authority in respect of any
action taken or to be taken in pursuance of any power conferred by or under this Act or under
the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
 The provisions of this Act to override other laws (Section 35)
• The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith
contained in any other law for the time being in force or any instrument having effect by virtue of
any such law.
 Limitation (Section36)
• No secured creditor shall be entitled to take all or any of the measures under sub-section (4) of
section 13, unless his claim in respect of the financial asset is made within the period of limitation
prescribed under the Limitation Act, 1963.
 Application of other laws not barred (Section37)
• The provisions of this Act or the rules made thereunder shall be in addition to, and not in
derogation of, the Companies Act, 2013, the Securities Exchange Board of India Act, 1992, the
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 or any other law for the time
being in force.
 Power of Central government to make rules (Section 38)
1) The Central Government may, by notification and in the Electronic Gazette as defined in clause (s) of
section 2 of the Information Technology Act, 2000, make rules for carrying out the provisions of this
Act.
2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide
for all or any of the following matters, namely:--
a. The form and manner in which an application may be filed under sub-section (10) of section 13;
b. The manner in which the rights of a secured creditor may be exercised by one or more of his officers
under sub-section (12) of section 13;
c. The fee: fee making an application to the Debts Recovery Tribunal under sub-section (1) of section 17;
d. The form of making an application to the Appellate Tribunal under sub-section (6) of section 17;
e. The fee for preferring an appeal to the Appellate Tribunal under sub-section (1) of section 18;”
f. The safeguards subject to which the records may be kept under sub-section (2) of section 22;
g. The manner in which the particulars of every transaction of securitisation shall be filed under section
23 and fee for filing such transaction;
i) The fee for inspecting the particulars of transactions kept under section 22 and entered in the
Central Register under sub-section(1) of section 26;
j) The fee for inspecting the Central Register maintained in electronic form under sub-section
(2) of section 26;
k) Any other matter which is required to be, or may be,prescribed, in respect of which provision
is to be, or may be, made by rules.
 THE SECURITY INTEREST
(ENFORCEMENT) RULES , 2002
In exercise of the powers conferred by sub-section (1) and clause (b) of sub-section (2) of Section
38 read with subsections (4), (10) and (12) of section 13 of the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act, 2002 (Act) the Central Government
hereby makes the following rules, namely:-
• Important definitions are given below:
 Some of the key Definitions.
In these rules, unless the context otherwise requires,-
a) “Authorised officer” means an officer not less than a chief manager of a public sector bank
or equivalent, as specified by the Board of Directors or Board of Trustees of the secured
creditor or any other person or authority exercising powers of superintendence, direction
and control of the business or affairs of the secured creditor, as the case may be, to exercise
the rights of a secured creditor under the Act;
b) Demand notice means the notice in writing issued by a secured creditor or authorised officer,
as the case may be, to any borrower pursuant to sub-section (2) of section 13 of the Act;
 Procedure for issue of demand notice.-
The service of demand notice as referred to in sub-section (2) of section 13 of the Act shall be
made by:
• Delivering or
• Transmitting
At the place where the borrower or his agent, empowered to accept the notice or documents on
behalf of the borrower, actually and voluntarily resides or carries on business or personally works
for gain, by registered post with acknowledgement due, addressed to the borrower or his agent
empowered to accept the service or by Speed Post or by courier or by any other means of
transmission of documents like fax message or electronic mail service:
• Where authorised officer has reason to believe that the borrower or his agent is avoiding the
service of the notice or that for any other reason, the service cannot be made as aforesaid, the
service shall be effected by affixing a copy of the demand notice on the outer door or some other
conspicuous part of the house or building in which the borrower or his agent ordinarily resides
or carries on business or personally works for gain and also by publishing the contents of the
demand notice in two leading newspapers, one in vernacular language, having sufficient
circulation in that locality.
• Where the borrower is a body corporate, the demand notice shall be served on the registered
office or any of the branches of such body corporate as specified under sub-rule (1).
• Any other notice in writing to be served on the borrower or his agent by authorised officer, shall
be served in the same manner as provided in this rule.
4) Where there are more than one borrower, the demand notice shall be served on each
borrower.
 Reply to Representation of the borrower:
a) After issue of demand notice under sub-section (2) of section 13, if the borrower makes any
representation or raises any objection to the notice, the Authorised Officer shall consider
such representation or objection and examine whether the same is acceptable or tenable.
b) If on examining the representation made or objection raised by the borrower, the secured
creditor is satisfied that there is a need to make any changes or modifications in the demand
notice, he shall modify the notice accordingly and serve a revised notice or pass such other
suitable orders as deemed necessary, within seven days from the date of receipt of the
representation or objection.
c) If on examining the representation made or objection raised, the Authorized Officer comes to
the conclusion that such representation or objection is not acceptable or tenable, he shall
communicate within one week of receipt of such representation or objection, the reasons for
non-acceptance of the representation or objection, to the borrower.
 Procedure after issue of notice:
• If the amount mentioned in the demand notice is not paid within the time specified therein, the
authorised officer shall proceed to realise the amount by adopting any one or more of the
measures specified in sub-section (4) of section 13 of the Ac for taking possession of movable
property, namely:-
• Where the possession of the secured assets to be taken by the secured creditor are movable
property in possession of the borrower, the authorised officer shall take possession of such
movable property in the presence of two witnesses after Panchnama drawn and signed by the
witnesses as nearly as possible in Appendix I to these rules.
• After taking possession under sub-rule (1) above, the authorised officer shall make or cause to
be made an inventory of the property as nearly as possible in the form given in Appendix II to
these rules and deliver or cause to be delivered, a copy of such inventory to the borrower or to
any person entitled to receive on behalf of borrower.
• The authorised officer shall keep the property taken possession under sub-rule (1) either in his
own custody or in the custody of any person authorised or appointed by him, who shall take as
much care of the property in his custody as owner of ordinary prudence would, under the similar
circumstances, take of such property:
• If such property is subject to speedy or natural decay, or the expense of keeping such property
in custody is likely to exceed its value, the authorised officer may sell it at once.
• The authorised officer shall take steps for preservation and protection of secured assets and
insure them, if necessary, till they are sold or otherwise disposed of.
In case any secured asset is:-
a) A debt not secured by negotiable instrument; or
b) A share, in a body corporate;
c) Other movable property not in the possession of the borrower except the property deposited
in or in the custody of any Court or any like authority, the authorised officer shall obtain
possession or recover the debt by service of notice as under:-
• In the case of a debt, prohibiting the borrower from recovering the debt or any interest thereon
and the debtor from making payment thereof and directing the debtor to make such payment to
the authorised officer, or in the case of the shares in a body corporate, directing the borrower to
transfer the same to the secured
• Creditor and also the body corporate from not transferring such shares in favour of any person
other than the secured creditor. A copy of the notice so sent may be endorsed to the concerned
body corporate’s Registrar to the issue or share transfer agents, if any;
• In the case of other movable property (except as aforesaid), calling upon the borrowers and the
person in possession to hand over the same to the authorised officer and the authorised officer
shall take custody of such movable property in the same manner as provided in sub-rules (1) to
(3) above;
• Movable secured assets other than those covered in this rule shall be taken possession of by the
authorised officer by taking possession of the documents evidencing title to such secured assets.
 Valuation of movable secured assets.
• After taking possession under sub-rule (1) of rule 4 and in any case before sale, the authorised
officer shall obtain the estimated value of the movable secured assets and thereafter, if
considered necessary, fix in consultation with the secured creditor, the reserve price of the
assets to be sold in realization of the dues of the secured creditor.
 Sale of movable secured assets.-
The authorised officer may sell the moveable secured assets taken possession under sub-rule (1)
of rule 4 in one or more lots by adopting any of the following methods to secure maximum sale
price for the assets, to be so sold-
• obtaining quotations from parties dealing in the secured assets or otherwise interested in
buying such assets; or
• inviting tenders from the public; or
• holding public auction; or
• by private treaty.
The authorised officer shall serve to the borrower a notice of thirty days for sale of the movable
secured assets,: If the sale of such secured assets is being effected by either inviting lenders from
the public or by holding public auction, the secured creditor shall cause a public notice in two
leading newspapers, one in vernacular language, having sufficient circulation in that locality by
setting out the terms of sale, which may include,-
• Details about the borrower and the secured creditor;
• Description of movable secured assets to be sold with identification marks or numbers, if any, on
them;
• Reserve price, if any, and the time and manner of payment;
• Time and place of public auction or the time after which sale by any other mode shall be
completed;
• Depositing earnest money as may be stipulated by the secured creditor;
• Any other thing which the authorised officer considers it material for a purchaser to know in
order to judge the nature and value of movable secured assets.
Sale by any methods other than public auction or public tender, shall be on such terms as may be
settled between the parties in writing.
 Issue of certificate of sale.
• Where movable secured assets is sold, sale price of each lot shall be paid as per the terms of the
public notice or on the terms as may be settled between the parties, as the case may be, and in the
event of default of payment, the movable secured assets shall be liable to be offered for sale again.
• On payment of sale price, the authorised officer shall issue a certificate of sale in the prescribed
form Appendix III to these rules specifying the movable secured assets sold, price paid and the
name of the purchaser and thereafter the sale shall become absolute. The certificate of sale so
issued shall be prima facie evidence of title of the purchaser.
• Where the movable secured assets are those referred in sub-clauses (iii) to (v) of clause (1) of
sub-section (1) of section 2 of the Act, the provisions contained in these rules and rule 7 dealing
with the sale of movable secured assets shall, mutatis mutandis, apply to such assets.
 Sale of immovable secured assets.
• Where the secured asset is an immovable property, the authorised officer shall take or cause to
be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix
IV to these rules, to the borrower and by affixing the possession notice on the outer door or at
such conspicuous place of the property.
• The possession notice as referred to in sub-rule (1) shall also be published, as soon as possible
but in any case not later than seven days from the date of taking possession, in two leading
newspaper one in vernacular language having sufficient circulation in that locality, by the
authorised officer.
• In the event of possession of immovable property actually taken by the authorised officer, such
property shall be kept in his own custody or in the custody of any person authorised or appointed
by him, who shall take as much care of the property in his custody as an owner of ordinary
prudence would, under the similar circumstances, take of such property.
• The authorised officer shall take steps for preservation and protection of secured assets and
insure them, if necessary, till they are sold or otherwise disposed off.
• Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the
authorised officer shall obtain valuation of the property from an approved valuer and in
consultation with the secured creditor, fix the reserve price of the property and may sell the
whole or any part of such immovable secured asset by any of the following methods:-
i. By obtaining quotations from the persons dealing with similar secured assets or otherwise
interested in buying such assets; or
ii. By inviting tenders from the public;
iii. By holding public auction; or
iv. By private treaty.
• The authorised officer shall serve to the borrower a notice of thirty days for sale of the
immovable secured assets, under sub-rule (5)
• If the sale of such secured asset is being effected by either inviting tenders from the public or
by holding public auction, the secured creditor shall cause a public notice in two leading
newspapers one in vernacular language having sufficient circulation in the locality by setting out
the terms of sale, which shall include, -
• The description of the immovable property to be sold, including the details of the encumbrances
known to the secured creditor;
• The secured debt for recovery of which the property is to be sold;
• Reserve price, below which the property may not be sold;
• Time and place of public auction or the time after which sale by any other mode shall be
completed;
• Depositing earnest money as may stipulated by the secured creditor;
• Any other thing which the authorised officer considers it material for a purchaser to know in
order to judge the nature and value of the property.
• Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if
the authorised officer deems it fit, put on the website of the secured creditor on the Internet.
• Sale by any methods other than public auction or public tender, shall be on such terms as may be
settled between the parties in writing.
 Time of sale, Issue of sale certificate and delivery of possession
• Sale of immovable property under these rules shall not take place before the expiry of thirty days
from the date on which the public notice of sale is published in newspapers as referred to in the
proviso to sub-rule (6) or notice of sale has been served to the borrower.
• The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in
his bid or tender or quotation or offer to the authorised officer and shall be subject to
confirmation by the secured creditor provided that no sale under this rule shall be confirmed, if
the amount offered by sale price is less than the reserve price, specified under sub-rule (5) of
rule 9 :
• If the authorised officer fails to obtain a price higher than the reserve price, he may, with the
consent of the borrower and the secured creditor effect the sale at such price.
• 25% immediately :On every sale of immovable property, the purchaser shall immediately pay a
deposit of twenty-five per cent of the amount of the sale price, to the authorised officer
conducting the sale and in default of such deposit, the property shall forthwith be sold again.
• Balance on or before the 15th day: The balance amount of purchase price payable shall be paid by
the purchaser to the authorised officer on or before the fifteenth day of confirmation of sale of
the immovable property or such extended period as may be agreed upon in writing between the
parties.
• In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited
and the property shall be resold and the defaulting purchaser shall forfeit all claim to the
property or to any part of the sum for which it may be subsequently sold.
• On confirmation of sale by the secured creditor and if the terms of payment have been complied
with, the authorised officer exercising the power of sale shall issue a certificate of sale of the
immovable property in favour of the purchaser in the Form given in Appendix V to these rules.
• Where the immovable property sold is subject to any encumbrances, the authorised officer may,
if he thinks fit, allow the purchaser to deposit with him the money required to discharge the
encumbrances and any interest due thereon together with such additional amount that may be
sufficient to meet the contingencies or further cost, expenses and interest as may be
determined by him.
• And if after meeting the cost of removing encumbrances and contingencies there is any surplus
available out of money deposited by the purchaser such surplus shall be paid to the purchaser
within fifteen days from date of finalisation of the sale.
• On such deposit of money for discharge of the encumbrances, the authorised officer shall issue
or cause the purchaser to issue notices to the persons interested in or entitled to the money
deposited with him and take steps to make the payment accordingly.
• The authorised officer shall deliver the property to the purchaser free from encumbrances
known to the secured creditor on deposit of money as specified in sub-rule (7).
• The certificate of sale issued under sub-rule (6) shall specifically mention that whether the
purchaser has purchased the immovable secured asset free from any encumbrances known to
the secured creditor or not.
 Steps for Appointment of manager
• The Board of Directors or Board of Trustees, as the case may be, may appoint in consultation
with the borrower any person (hereinafter referred to as the Manager) to manage the secured
assets the possession of which has been taken over by the secured creditor.
• The manager so appointed shall not be a person who is, or has been, adjudicated insolvent, or
has suspended payment or has compounded with his creditors, or who is, or has been, convicted
by a criminal court of an offence involving moral turpitude
• The Manager appointed by the Board of Directors or Board of Trustees, as the case may be, shall
be deemed to be an agent of the borrower and the borrower shall be solely responsible for the
commission or omission of acts of the Manager unless such commission or omission are due to
improper intervention of the secured creditor or the authorised officer.
• The Manager shall have power by notice in writing to recover any money from any person who
has acquired any of the secured assets from the borrower, which is due or may become due to
the borrower.
• The Manager shall give such person who has made payment under sub-rule (3) a valid discharge
as if he has made payments to the borrower.
• The Manager shall apply all the monies received by him in accordance with the provisions
contained in subsection (7) of section 13 of the Act.
 Procedure for Recovery of shortfall of secured debt-Application to DRT either
personally or through registered post
• An application for recovery of balance amount by any secured creditor pursuant to sub-section
(10) of section 13 of the Act shall be presented to the Debts Recovery Tribunal in the form
annexed as Appendix VI to these rules by the authorised officer or his agent or by a duly
authorised legal practitioner, to the Registrar of the Bench within whose jurisdiction his case
falls or shall be sent by registered post addressed to the Registrar of Debts Recovery Tribunal.
• Please note that the provisions of the Debts Recovery Tribunal (Procedure) Rules, 1993 made
under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), shall
mutatis mutandis apply to any application filed by under sub-rule (1).
• An application under sub-rule (1) shall be accompanied with fee as provided in rule 7 of the Debts
Recovery
 Application to the Tribunal / Appellate Tribunal
• Any application to the Debt Recovery Tribunal under sub-section (1) of section 17 shall be, as
nearly as possible, in the form given in Appendix VII to the rules.
• Any application to the Appellate Tribunal under sub-section (6) of section 17 of the Act shall be,
as nearly as possible, in the form given in Appendix VIII to the said rules. Any appeal to the
Appellate Tribunal under section 18 of the Act shall be, as nearly as possible, in the form given in
Appendix IX to the said rules.
 Fees for applications and appeals under section 17 and 18 of the Act
• Every application under sub section (1) of section 17 or an appeal to the Appellate Tribunal under
sub-section (1) of section 18 shall be accompanied by a fee provided in the sub-rule (2) and such
fee may be remitted through a crossed demand draft drawn on a bank or Indian Postal Order in
favour of the Registrar of the Tribunal or the Court as the case may be, payable at the place
where the Tribunal or the Court is situated.
(2) The amount of fee payable has been prescribed in rule 18.
• There are nine annexures under THE SECURITY INTEREST (ENFORCEMENT) RULES, 2002 Appendix-i [See
rule-4(1)] Panchnama
• Appendix-ii [See rule-4(2)] inventory
• Appendix-iii [See rule-7(2)] Certificate of Sale (for movable property)
• Appendix-iV [See rule-8(1)] Possession notice (for Immovable property)
• Appendix-V [See rule-9(6)] Sale Certificate (for Immovable property)
• Appendix Vi FORM [See rule 11(1)] Application under sub-section (10) of Section 13 of the Securitisation
and Reconstruction of Financial
• [Appendix-Vii [See rule 12(1)] Application under sub-section (1) of Section 17 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
• Appendix-Viii [See rule 12(2)] Application under sub-section (6) of Section 17 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
• Appendix-iX [See Rule 12(2)] Appeal under Section 18 of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002